1/52
Looks like no tags are added yet.
Name | Mastery | Learn | Test | Matching | Spaced |
---|
No study sessions yet.
Macroeconomics
Study of the economy as a whole, including unemployment, inflation, and economic growth.
Microeconomics
Study of individual economic units, like households and firms.
Money supply
Total amount of money in circulation within an economy.
Monetary policy
Central bank actions to manage the money supply and credit conditions.
Fiscal policy
Government decisions regarding spending and taxation.
Circular Flow Diagram
Illustrates how money, goods, and services flow between different economic sectors.
Product market
Where goods and services are bought and sold.
Factor market
Where resources (like labor, land, capital) are bought and sold.
Financial sector
Institutions that facilitate the flow of funds between savers and borrowers.
Aggregate supply
Total quantity of goods and services firms are willing to produce at different price levels.
Short Run AS
Upward-sloping, showing that higher prices lead to more output in the short run.
Long Run AS
Vertical, representing the economy's full potential output regardless of price level.
General price level
Average level of prices in an economy.
Aggregate demand
Total spending on goods and services in an economy at different price levels.
Macroeconomic equilibrium
Where aggregate supply equals aggregate demand.
Short run macroeconomic equilibrium
Where AS and AD intersect, but not necessarily at full employment.
Long run macroeconomic equilibrium
Where AS, AD, and LRAS all intersect, indicating full employment.
Recessionary gap
When equilibrium output is below full employment.
Inflationary gap
When equilibrium output is above full employment, leading to inflation.
Contraction
Period of declining economic activity.
Expansion
Period of increasing economic activity.
Trough
Lowest point of a recession.
Peak
Highest point of an economic expansion.
Recession
A significant decline in economic activity spread across the economy, lasting more than a few months.
Speculation
Engaging in risky financial transactions in the hope of making a quick profit.
Money multiplier effect
The process by which an initial deposit leads to a larger increase in the money supply.
Bank run
When many customers withdraw money from a bank simultaneously due to fears of the bank's solvency.
Deflation
A general decrease in the price level.
Quantity Theory of Money
States that the price level is directly proportional to the money supply.
Velocity (of money)
The average number of times a unit of money is spent in a given period.
Causes of the Great Depression
Stock market crash, banking panics, monetary policy errors, international trade issues.
What did we learn from the Depression?
Importance of government intervention, central bank's role in stabilizing the financial system, dangers of deflation.
John Maynard Keynes and Keynesian Economics
Advocated for government intervention (fiscal policy) to stabilize the economy during recessions.
Milton Friedman and Monetarism
Emphasized the importance of controlling the money supply (monetary policy) for economic stability.
Subprime loan (or borrower):
A loan given to people with a bad credit history, meaning they are a higher risk to lenders.
Mortgage-backed securities:
Investments made up of many home loans bundled together and sold to investors.
Toxic assets:
Investments that have lost a lot of their value and are hard to sell.
Credit default swap:
An insurance-like contract that protects a lender if a borrower fails to pay back a loan.
Repurchase agreement (Repo):
A very short-term loan where one party sells securities and agrees to buy them back later at a slightly higher price.
Clearing bank:
A bank that handles and settles payments between other banks.
Systemic risk:
The danger that the failure of one major financial firm could cause the whole financial system to collapse.
Credit freeze:
A sudden and sharp stop in lending, making it very hard for businesses and people to borrow money.
Contagion:
When financial problems quickly spread from one part of the economy or country to another.
TARP:
A government program where the U.S. Treasury bought troubled assets from banks to stabilize the financial system.
Capital injection
When money is put into a company or bank to improve its financial health and stability
Federal Funds Rate
The target interest rate for overnight lending between banks.
Discount Rate
The interest rate at which commercial banks can borrow directly from the Fed. It is typically lower than the Federal Funds Rate and is used as a tool to regulate the money supply.
Reserve Rate (Interest Rate on Reserve Balances)
The interest paid by the Fed on reserves held by banks.This rate serves as a tool for monetary policy and influences banks' willingness to lend.
Capital (or reserve) requirement
The fraction of deposits banks must hold in reserve. Also helps ensure that banks maintain a level of liquidity and can meet withdrawal demands while also influencing their ability to create loans.
Open Market Operations
The buying and selling of government securities by the Fed to control the money supply.
Jerome Powell
Current Chair of the Federal Reserve.
US Treasury
The executive department responsible for government revenue and public debt.
Treasury bonds
Debt securities issued by the U.S. government.